Are Africa's Economies Growing While Poverty Increases?

May 6, 2015

This year marks the 20th year since sub-Saharan Africa started on a path of faster economic growth. During that period, growth has averaged 5.2 percent per year. Meanwhile, the number of people on the continent reportedly living under $1.25 a day has continued to creep upwards from 358 million in 1996 to 415 million in 2011—the most recent year for which official estimates exist.

What can explain these divergent trends? Five factors can account for sub-Saharan Africa's disappointing poverty numbers:

The first is the region's rapid population growth of 2.6 percent a year. While African economies are generating more income, that income has to be shared among an ever-increasing number of people.

The second factor is the depth of Africa's poverty compared to poverty elsewhere. In 2011, the average person living in extreme poverty in Africa lived on 74 cents a day, whereas for the rest of the developing world, it was 98 cents.

The third factor is that even though inequality is not rising in most African countries, inequality is already at unusually high levels. Where initial inequality is high, it is to be expected that economic growth deliver less poverty reduction, since the absolute increases in income associated with rising average incomes will be that much smaller for the have-nots versus the haves.

The fourth factor is that there is adegree of mismatch between where growth is occurring andwhere the poor are on the continent.

The fifth and final factor concerns data quality. Poverty estimates are drawn from household surveys which in most African countries are conducted infrequently. Those that do take place often suffer from operational glitches that affect the credibility of the results.

The dissonance between Africa's growth performance and its poverty numbers is a striking phenomenon that demands an explanation.